HELIOS TECHNOLOGIES, INC. Q4 FY2025 earnings call

• Returned to growth by executing customer-centric go-to-market strategy, redirected resources to engage with customers and accelerated new product launches. • Took decisive action to optimize portfolio, including CFP divestiture, aligning go-to-market in Australia, reallocating engineering resources. • Introduced new share repurchase program in 2025, repurchased 1% of outstanding shares. • Fortified leadership team in 2025 with promotions. • In 2025, overcame macroeconomic challenges like PMI and industrial production contraction, global tariffs, geopolitical uncertainty, weak consumer market. • Fourth quarter sales exceeded expectations, full year sales grew, margins strengthened with four consecutive quarters of gross margin expansion, adjusted EBITDA 20.1% in quarter, second quarter in a row in 20s. • Numerous operational accomplishments in 2025 including customer-centric go-to-market, portfolio optimization, share repurchase, leadership team fortification, overcoming macro challenges.

Fourth quarter sales exceeded expectations at $211 million, up 17% with 4% growth for full year to $839 million. Pro forma basis, excluding CFP divestiture, 4th quarter sales up 29% and full year up 6%. Hydraulics: Pro forma 27% sales growth in Q4. End markets: Mobile applications driven by construction, ag market up for second quarter in a row. Gross profit grew 27% YOY, gross margin expanded 440 basis points to 34.1%. SEA expenses increased $1.3 million, or 7%, but improved as % of sales. Electronics: Sales up 31% YOY in Q4. Recreational space, industrial, mobile end markets solid. Health and wellness grew YOY. Gross profit up 40%, gross margin expanded 220 basis points. SEA expenses increased $3.3 million, but improved as % of sales. Operating income up 76%, operating margin expanded 330 basis points.

• First quarter 2026 sales expected in range of $218 to $223 million, up 22% YOY midpoint pro forma. • Consolidated adjusted EBITDA margin expected in range of 19.5 to 20.5%, up 250 basis points midpoint. • Diluted non-GAAP EPS expected $0.65 to $0.70 per share, up 53% midpoint. • Full year 2026 net sales expected range $820 to $860 million, 6% growth midpoint pro forma. • Hydraulics net sales expected range 510 to 530 million, up ~5% midpoint pro forma. • Electronics net sales expected range 310 to 330 million, up 7% midpoint. • 2026 adjusted EBITDA margin expected range 19.5% to 21.0%. • Diluted non-GAAP EPS expected range $2.60 to $2.90, 7% growth midpoint.

• Macro challenges like PMI and industrial production contraction, global tariffs, geopolitical uncertainty, weak consumer market. • Uncertainty around global trade situation and tariffs. • Potential constrained supply of memory chips. • Volatility in consumer exposed demand, particularly in recreational marine markets. • Risks and uncertainties that could cause actual results to differ materially from forward-looking statements, as detailed in annual report on Form 10-K for 2024 and upcoming 10-K.

Q: Tomo Sano with JP Morgan asked about whether benefits from go-to-market initiatives or new product launches are fully reflected in guidance for second half and key assumptions for second half and potential for upside.

A: Sean and Jeremy responded that they feel good about trajectory to start the year, but back half will lap tougher comps, balance uncertainty like Middle East, supply challenges, but believe go-to-market strategies will sustain momentum.

Q: Tomo Sano followed up on capital locations, key capital priorities.

A: Jeremy said they've been paying down debt, projecting higher CapEx in 2026 for productivity, automation, new product launches.

Q: Nathan Jones with Stifel asked about recent commercial wins, products, markets, run rates.

A: Sean said they'll dive deeper at investor day, talked about existing customers, share of wallet, product launches, aerospace as area of focus, new markets and adjacencies at investor day.

Q: Nathan Jones followed up on ag market commentary.

A: Sean said it's about channel inventory levels being healthier, not strong end market recoveries yet.

Q: Meg Dobre with Baird asked about end markets relative to outlook, seasonality, tariffs.

A: Sean and Jeremy responded about impact of CFP, hydraulics business, balancing order book visibility with global volatility, tariffs, supply of memory chips.

Q: Meg Dobre followed up on sizing tariff impact and pricing in 2026.

A: Jeremy said tariff situation has unknowns, monitored closely, pricing actions to offset, similar approach for cost inflation.

Q: Jeff Hammond with T-Bank asked about margin expansion levers in 2026.

A: Sean and Jeremy said volume is key driver, SQDC approach, productivity initiatives like synchronous flow, reconfiguring operations.

Q: Jeff Hammond followed up on electronics end markets.

A: Sean talked about Belboa Water Group, Innovation Control, health and wellness, recreational markets, new products, sales force hunting new business wins.

Q: Chris Moore with CJS Securities asked about returning to 2021 adjusted EBITDA margin level and ramping quickly.

A: Sean said targeting mid-20s, planning for market recovery, managing headcount, pushing productivity initiatives.